By Andy Browne, Editorial Director of the New Economy Forum
By and large, China’s Belt & Road Initiative gets a bad press in the U.S., much of Europe, Japan and India. But a lot of the criticism — it’s a “debt trap,” for instance, or China’s bid for empire — is way overblown.
At last week’s second annual Belt & Road gathering in Beijing, President Xi Jinping went out of his way to address international concerns. Whether this represents a reset, a course correction, or simply a rhetorical gesture remains to be seen. There are no easy fixes: The problems mainly arise when China exports the massive flaws of its own development model along with its vast industrial capacity. The former include corruption and cronyism, non-transparent contracts and, above all, pollution. Critics should focus less on debt and more on the fleets of coal-fired power stations China is building across stretches of the Eurasian landmass.
Still, the view of Belt & Road from most of the emerging world looks very different. Who else, apart from China, is building transport and trading infrastructure at speed and scale? Not the West. As Nature magazine reports in its latest edition, the hardware is accompanied by generous transfers of scientific and technical know-how.
Here are a few of the myths that have sprung up around this sprawling, haphazard and oddly named initiative that is nonetheless reshaping the 21st Century.
Myth #1: China is pursuing “debt trap diplomacy”
Opponents of the Belt and Road, such as U.S. Vice President Mike Pence, repeat this critique over and over. But the idea that China deliberately forces debt onto poor countries, then grabs physical assets when they can’t repay the loans, isn’t supported by the facts, writes Deborah Brautigam, an expert on China-Africa relations at Johns Hopkins University. The one case critics cite — Hambantota Port in Sri Lanka, an expensive flop that the government was obliged to hand over to a Chinese state company —is an exception. It is true, writes Simon Rabinovitch in The Economist, that Chinese loans can be “ruinously expensive” and handed out with little regard for risk, often to countries like Pakistan already swimming in red ink. But Rabinovitch among others thinks this makes Chinese lending merely clumsy rather than malevolent.
Myth #2: It’s another Marshall Plan
This comparison gets everything backwards. Contrary to popular belief, the U.S. Marshall Plan didn’t rebuild Western Europe after World War II. Roads, bridges and other transport infrastructure had been largely fixed by the time U.S. loans and grants kicked in, according to the economist Barry Eichengreen, who notes that American largesse added at most only one quarter of one percentage point to European growth in the immediate postwar years. Rather, the Marshall Plan’s most enduring achievement was to inculcate free market ideas, and habits of cooperation among former enemies, that underpinned democracy in postwar Europe. To the extent that China exports values along the Belt and Road they promote state capitalism and authoritarian governance, including digital surveillance and censorship tools. In that sense, the initiative is the exact opposite of the Marshall Plan.
Myth #3: The project is Xi Jinping’s “Grand Strategy”
Certainly, Xi’s signature project displays his sweeping global vision, in contrast to Donald Trump’s narrow “America First” view of the world. But in terms of execution, it evokes one of Communist China’s raucous “mass mobilization” campaigns more than the Roman Empire. Multiple Chinese local governments, state enterprises and banks are swept up in a state-funded investment free-for-all, one that enriches these groups but often neglects the interests of poor countries desperate for infrastructure. Conceptually, the whole thing is “breathtakingly ambiguous,” writes Jonathan E. Hillman, a leading U.S. expert on the project, who suggests that one way to think about Belt and Road is as a brand that attaches itself to almost anything— infrastructure, for sure, but also fashion shows, art exhibits, marathons and even dentistry. The program has branched off in so many directions it now covers the entire planet, and has lately wandered into outer space. “The Belt and Road isn’t a master plan: It needs one,” writes Yuen Yuen Ang, a professor of political science at the University of Michigan, in a Bloomberg Opinion piece.
Myth #4: The astronomical price-tag
The one-trillion-dollar figure often seen in headlines likely low-balls projected outlays. But $8 trillion — the top end of estimates — is pure fantasy. It’s hard to put a realistic dollar figure on a project that is so spectacularly ill-defined: China has never published a full list of Belt and Road projects. The American Enterprise Institute and Heritage Chinese Global Investment Tracker, which monitors actual Chinese construction and investment (rather than promises), puts the total at roughly $340 billion during the period 2014–2017. It’s safe to say that over the lifetime of the project (another slippery concept since China hasn’t given an end-date) cumulative spending will be less than what the U.S. squandered on futile wars in the Middle East and Asia in recent decades. Of course, this is one reason why the U.S. hasn’t been able to come up with a real counter to the Belt and Road beyond rhetorical barbs. Washington doesn’t have the money.
Myth #5: It will promote “yuan internationalization”
Despite all the hype about the Chinese currency challenging the mighty greenback, the majority of Belt and Road projects are financed in dollars. This is partly because yuan held outside China remain relatively scarce. But it means that China’s ability to fund the Belt and Road will dwindle over time as its trade surpluses inevitably disappear and perhaps turn negative, choking off its dollar earnings. If China could print yuan to finance Belt and Road projects, its capacity to lend would be virtually limitless. As it is, writes David Lubin, an emerging markets economist at Citibank, since “China lacks an infinite supply of dollars, it therefore lacks an infinite capacity to meet its goals.”
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